Long-term investing can be difficult to wrap one’s head around at first. It’s not always easy to plan 10, 15 or 20 years in the future. But I believe the potential benefits of this sort far outweigh any other strategy. Especially in times of market uncertainty.
Since the last big crash, thousands of companies across the world have seen their shares grow by double, triple, or even quadruple digits. The past is not a predictor of the future, but it can reveal patterns that savvy investors can either take advantage of or use to keep a clear head.
The poster child of long-term investing
Berkshire-Hathaway is the American conglomerate under the stewardship of famed investor Warren Buffett. Buffett has been at the helm since 1965 and has steered the company through multiple crashes and periods of contraction. However, Berkshire has always managed to stay on top. Between 1965 and today the company’s A-shares have grown from $19 to over $470,000 each. In that time there have been roughly seven market crashes in the U.S.
I can only imagine the horror of those who sold their shares during those crashes. Or those who were put off investing because they weren’t thinking of the long term. The company’s B-shares have grown 452% since 2009 and I see no reason why they can’t see similar growth over the next 10 years. Buffett’s tenure at Berkshire Hathaway will undoubtedly come to a close at some point, but I trust that he and the board have a suitable successor in mind.
Tech is here to stay
Another, more recent example could be Amazon. The Covid-19 pandemic has seen the online retail and media company rocket into the stratosphere, but it’s worth noting that it first debuted on the stock market at $1.97 back in 1997. Amazon was one of the few internet companies to survive the dot-com bubble, but it also held up remarkably well during the 2008 financial crash. At that time, shares were worth just $50 each. How much are they now?
$3,052.
That’s a growth of roughly 5,000% in just over 10 years.
Again, not every company can be Amazon, but the point remains that investors who held onto those shares or even bought them as prices fell have made a small fortune. This is what characterises the risk-reward factor with investing. Yes, there is a risk, but as long as I focus on the long term, do my research, and keep a level head when times are tough, I stand a good chance of coming out on top.
Stock market volatility
There’s not much I can do about the macro factors which affect the stock market. No one can be sure when there will be a pandemic or tensions boil over into war. But I also won’t let fears of these things prevent me from investing. What I can do is work to focus on the long term. I’m certainly not immune to the fears of a market downturn, but so long as I keep my focus on 10 or even 20 years in the future, I know I can weather whatever storms come my way.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Reynolds owns Berkshire Hathaway (B shares). The Motley Fool UK has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
This post was originally published on Motley Fool
